The GBP/CAD pair is an interesting pair at the moment. We continue to see bearish pressure early in the day, but then will turn right back around to show bullish pressure after that. I believe that this has a lot to do with the oil market more than anything else. After all, the oil markets have a significant influence on the Canadian dollar, and of course as this pair rises it shows weakness in the Loonie. With this being the case, I think that the market will continue to grind higher, but that’s probably going to be the key word here more than anything else: “grind.”
Oil rolling over?
I think looking at the oil markets they are starting to roll over rather significantly. The WTI Crude Oil market breaking below the $43 level would be extraordinarily bearish for the Canadian dollar. This in fact probably would be the beginning of a new leg lower, and that means that the CAD would get pummeled just about everywhere. However, there is a caveat with this pair as the British pound is concurrently getting pounded as well.
The gap above the 1.75 level will be a major deterrent for longer-term buyers, so I think that the move higher is only going to be short-term at best. I think we continue to bounce around in the overall consolidation area between the 1.70 level on the bottom and the aforementioned 1.75 level on the top. With this being the case, I think it’s just natural that we drift higher and oil markets will probably be one of the major catalysts. Taking things even more interesting at this point in time, we get the Crude Oil Inventories announcement coming out of the United States. If we get a larger than anticipated inventory number, that would show a weakening of demand when it comes petroleum, and that could make this market go higher. If we fall from here, I would look for support below in order to take this trade at lower levels.
